Urgent need to bolster states’ IGR

CBN data for 2015 reveal that internally generated revenue (IGR) provided 26.4% of the total revenue of the 36 states and the Federal Capital Territory, compared with 21.8% the previous year. Aggregate IGR, however, declined to N756bn from N801bn in 2014. Again, Lagos State emerged as the leading state, achieving an IGR/total revenue ratio of 69%. Enugu was next in line with 53% while Ogun, Rivers and Abia managed ratios of 50%, 44% and 32% respectively. We stick with the CBN series for ease of comparison although it is dated and several individual states show different (generally higher) percentages.

For over 24 months, the need to bolster IGR collection has been a topic on the front burner due to the slide in the oil price. There have been pronounced swings, predominantly downwards, in the total monthly payout by the Federation Account Allocation Committee (FAAC). Very few analysts anticipate a strong recovery in the oil price in the year ahead. 

Value-added tax (VAT) receipts stood at N381bn, representing 13.3% of total revenue in 2015. This compared with N389bn posted the previous year.

Given that Lagos State is the commercial hub of the country, it is no surprise that it accounted for 19% of total VAT in 2015.

According to the DMO, states’ domestic debt (excluding bonds) at end-2015 amounted to N2.5trn. Delta State was the largest debtor among the states, with total domestic obligations of N320bn.


Urgent need to bolster states’ IGR Sources: CBN; FBNQuest Research

The FGN has launched a few relief programmes to bail out some state governments, and settle arrears on salaries and pensions. These include the conversion of states’ bank borrowings into FGN long bonds.

The onus is on the state governors to boost their revenues. They could look to the non-oil economy (such as agriculture and mining), and widen the tax net to cover more of the informal sector. 

Our site uses cookies to enhance your experience. By continuing to browse, you agree to our Privacy Policy